SACRAMENTO, Calif. (AP) — Riding a wave of new tax revenue, California's spending plan for the coming fiscal year will rise by 7 percent, a powerful indication that the state that came to symbolize fiscal mismanagement during the heart of the recession is emerging into brighter days.
Gov. Jerry Brown on Thursday proposed a $97.6 billion general fund budget for the 2013-14 fiscal year that wipes out years of deficits and even includes a modest surplus.
The additional revenue hiked the spending plan by $6.3 billion over the current year and helps the governor pour more money into public schools and universities.
The state's budget shortfall stood at $25 billion when Brown took office two years ago.
"California today is poised to achieve something that has eluded us for more than a decade — a budget that lives within its means, now and for many years to come," Brown said during a news conference at the Capitol.
A rebounding economy coupled with new revenue from the higher sales and income taxes voters approved last November have put the nation's most populous state on a healthier financial trajectory as it begins to turn the corner on an era of deep budget shortfalls and spending cuts to core state programs.
California's persistent budget woes came to represent the plight of states struggling through the recession as tax revenue declined steeply, leaving governors and state legislatures around the country little choice but to consider deep cuts or unpopular tax increases.
Brown took both approaches. He pushed an austerity message that forced cuts throughout state government during his first two years in office while persuading California voters to approve increases to the state sales tax and on income taxes on high-income earners.
Despite the new revenue flowing in, Brown has warned his Democratic colleagues who control both houses of the state Legislature that they must not overplay their hand and spend too freely. The governor wants to build a reserve fund for future downturns to help smooth the type of boom-and-bust budget cycles that have become chronic in California.
"And I'm determined to avoid the fiscal mess that the last few governors had to deal with," Brown said. "The way you avoid it is by holding the line, by exercising a common sense approach to how we spend our money."
His budget contains an $850 million surplus.
Brown wants to focus the additional spending on public schools. His budget includes $2.7 billion more for K-12 education, which will account for 57 percent of general fund spending.
Among Brown's priorities is creating a new education funding formula. It would be aimed at giving school districts more control over spending and directing state money to the neediest children and poorest districts.
His proposal is expected to run into opposition from lawmakers representing more affluent regions of the state, but Brown said the state should spend proportionally more on students who have "disproportionate challenges."
"Growing up in Compton or Richmond is not like it is to grow up in Los Gatos or Beverly Hills or Piedmont," he said of his redistribution plan. "It is controversial, but it is right and it's fair."
Spending cuts are still expected in some areas, such as the courts, while health care programs and social services are expected to see no increases in spending.
The state's two four-year higher education systems, the University of California and California State University, each will receive $250 million more.
California's general fund spending hit a high of $103 billion before the recession decimated the state's economy and severely cut tax revenue for the state and municipalities. It dropped to a low of $87 billion during the 2011-12 fiscal year, requiring lawmakers to make deep cuts in a wide array of state services, including K-12 schools, higher education, the court system, and social services for the needy and disabled.
Environmentalist's are welcoming the Governor's budget news today. It’s the first time in four years that a Governor has not proposed closing parks to save money. Instead, the state will hire 65 people to do fire prevention work paid for by a fire fee on rural landowners. A lumber tax will pay for more staff to do inspections on logging operations and their impact on streams. Also, the budget proposal provides funding for Salton Sea restoration. On the flip side, revenue from the state's first carbon credit auction could be less than expected, possibly because the initial price was low.
The proposed budget would boost K-12 education by an additional $2.7 billion dollars. It would give public universities a modest increase, though less than they requested. Brown insisted that the University of California and California State University systems figure out how to do more with less, putting an emphasis more on educating undergraduates than on other priorities such as research.
California educators are relieved that for the first time in years the governor's proposed budget would increase school funding. "Overall, I think it's good news for schools,” said Mary Shelton,l superintendent of San Ramon Valley Unified School District. “It looks like we should be able to maintain some stability and perhaps begin to restore some programs that might have been cut."
Shelton says San Ramon and other wealthy suburban districts will likely get a smaller increase, though. That's because the governor's budget would give a larger share to districts with more low-income students and English Language Learners.
Spending more on education for poor children and English learners will benefit all Californians in the long run, Brown said, even wealthy suburbanites whose schools might get less of an increase, because those people, in their old age, will depend on a skilled workforce paying taxes and taking care of the state’s growing elderly population.
To direct more money to disadvantaged groups, the governor would eliminate most of the state's so-called "categorical" funding requirements -- pots of money targeted to specific programs. That would also give local school districts greater flexibility.
Jeff Freitas of the California Federation of Teachers says he's not sure that's such a good idea. "We do believe in some local control, but we also believe the state does provide some checks on the locals in terms of requiring certain programs for these students of need."
The legislature still has to approve the plan. It will likely begin hearings on the budget next week.
Quotes from Brown's press conference:
"What are we going to do with the money we have? We have achieved the position we’re in because of tough cuts that Democrats didn’t like to make, but they did. And then the people voted for taxes. By the way the cuts are about 3 times more than the taxes. But it’s entirely significant that we broke the logjam by going to the people. Because we do still have government by the people as well as for the people."
"I’m determined to avoid the fiscal mess that the last few governors didn’t deal with. The way you avoid it is by holding the line, by exercising a common sense approach to how we spend out money."
"It’s not just the money that’s going in, but it’s going in under new conditions."
"In America the fruits of our prosperity each year have each year been disproportionately channeled to capital and away from labor. And this is causing this tremendous growth in inequality… You’ve got the middle class hollowed out. The people at the bottom are struggling. .. There will be lots of bills as to how to deal with that. We’re spending more than any other state, and that’s good, and I support that. But we have to live within the means we have. Otherwise we get into that situation where we have red ink… I want to avoid the boom and the bust, the borrow and the spend…
"Fiscal discipline is not the enemy of democratic governance, but rather its fundamental predicate. Fiscal discipline and balance allows us to take care of the needs of the people over time, instead of just having a momentary rash of excitement, and then we pay with a hangover several years later."
"We’re not just investing in our schools, we’re doing it in the context of encouraging local control. We want to put the decisions closer to the classroom ... Let the problems be solved closest to where they exist. Those institutions that have the most direct contact...should have the greatest authority. So the teacher in the classroom obviously has the maximum authority, then the principal, then the superintendent, then the school board, the state school board, the state superintendent, the governor and the legislature. But as you go up the line you lose control and you build bureaucracy... [The way ] we create greater control is we eliminate most of the categorical programs because they are built on bureaucracy on auditing on non-teachers being increasingly hired to manage the various complicated flows of money. Now, that’s local control."
“We are committed to expanding Medi-Cal, we’re committed to bringing more people into the healthcare system, but we recognize there are big costs out there. There are big unknowns so we’re going to move carefully, but we’re going to move with commitment, because I believe people do need decent healthcare, and I believe what Pres. Obama did was historic. It was heroic, and I’m going to do everything I can to be a good partner to make sure his plan works.”
"The cost of medical care in California [prisons] is three times the cost of medical care at prisons around the country. It’s clear to me and it’s clear to our experts that we are providing more than the constitution requires. Because of that we are taking money from some place else… drug treatment, re-entry programs… So the courts, paradoxically, by protecting the right to an ever-expanding healthcare are taking money that could go, and would go… to returning prisoners to society… We’ll put that money into improving the situation for our prisoners so they can learn more and deal with their substance abuse problems…"